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price inflation and revaluation of wages in Cameroon: What impact on food consumption expenditure of households?

The food crisis is a global phenomenon and has become the priority of the international community, particularly the IMF and World Bank. The African continent is most affected by this scourge'''', coupled with rising food prices and some of the inputs to the social and economic development (cement, rebar, etc.).

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Cameroon has experienced in February 2008, three days of high tension marked by riots that led to three major decisions:
- Revaluation of 15% of base salary workers paid from the state budget;
- The falling price of a liter of fuel at the pump, 6FCFA and for the super 5FCFA for gasoil and kerosene;
- Lower prices of food products (rice, flour, sugar, imported fish, etc..), telephone and electricity.

These decisions marked a new era for Cameroon, who saw an early solution to their discontent. However, these measures did they represent swords of Damocles above our heads?

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This reflection aims to analyze the causes of rising commodity prices and its impact on food consumption expenditure of households. This analysis is based on the assumption that rising commodity prices is the result of speculation by traders and farmers.

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1. The causes of rising prices

Several causes are attributed to higher commodity prices, among other things include the decline of local production and international quotas imposed by the exporting countries, and speculation by traders and local producers.

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Speculation is a human activity is to imagine, to anticipate the reactions and activities of others, as if we were in his place, and take a look at our own activity, as if we were a another. This is for an economic agent to deliberately price risk is to buy now say a financial asset or other property in the hope that its price will rise, and we can sell it tomorrow with profit (Giraud [1] , 2002). Despite being the subject of moral condemnation, should we still condemn the speculators?

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For some economists, speculation would be destabilizing and likely to engage in the real economy on non-optimal paths, that is to say prevent them from reaching the highest level of growth and possible use. For others, the speculators would not risk buying with other economic players to get rid of them these Risks are inherent in the economic system, as generated by an irreducible uncertainty about the future.

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Two fundamentals suggest that speculators should not be condemned: the rationality of traders and producers (their goal is to have the highest profit), and asymmetric information ( the same information is not shared by the state, producers and traders, and if so, it is not perceived in the same way).

Indeed, objectives set by the state, particularly in terms of tax revenues are slowing the emergence and development of small businesses, small merchant and owner of a stall. Suppliers eager to profit therefore anticipate an increase in taxes (import tax discharge, etc..), Fuel pump, foreign demand, and create shortages of stock markets. The scarcity of products and increased local demand and the foreign lead to an adjustment in prices, which increase their markets. The figure below illustrates this situation.

The price increase is the direct result of speculation by traders, which itself is caused by expectations of higher taxes, prices of some inputs, and a possible increased demand from neighboring countries.

2. The impact of higher prices on food consumption expenditure of households

There is a positive relationship between increased income and purchasing power, and an inverse relationship between higher prices and purchasing power. What may be the result of the combined effect of a wage increase and higher prices on food consumption expenditure of households during the same period? Do a simulation with an official from a food basket of consumer goods: rice, fresh fish (mackerel), sugar, bread and milk. Consider

an official of the class A2, index 605, grade: A general practitioner, married with two children. His net monthly salary rose from 204,000 CFA francs before the presidential decree According to CFA 234,000.

- Suppose for breakfast daily, this agent 300FCFA buys bread, sugar and milk 100FCFA 200FCFA (four sacks, sold 50FCFA unit)
- Suppose that for a meals daily, this agent of the state consumes one kilogram of fish sold 950FCFA and a kilogram of rice sold 400FCFA [2] ;
- Finally, suppose that the necessary ingredients to make this meal cost about 1000FCFA.

The daily expenditure for the nutrition of the household is estimated at 2950FCFA or 88500FCFA month. This expenditure was evaluated 79500FCFA per month for the same food consumption two years ago (the price of a kilogram of fish cost so 700FCFA and the price of a kilogram of rice worth 350FCFA).

The different configurations are presented in the table below:

Based on these estimates, the food expenditure represents approximately 37.82% monthly wage of this agent state, against 38.97% two years ago. It should be noted that this proportion was much high before the wage increase because of rising market prices, accounting for 43.38% while monthly salary.

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Before the pay rise, the share of wages for food consumption rose from 38.97% to 43.38% , an increase of 4.41 %. After upgrading, this share increased from 43.38% to 37.82% , a decrease of expenditure for Consumer 5.56% . Moreover, if prices had remained the same as those recorded two years before, a 15% revaluation would lead to a net reduction in spending 5% for the selected basket ( 33.97% -38, 97%).

It is thus noted that the combined effect of rising prices and wage increase led to an increase in food expenditures of 4.41% and a decrease of these 5.56%, a net decrease of 1.15% both periods.

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Although reclamation has reduced the share of wages to the cost of food consumption, we note that rising prices created a gap of 3.85% ( 5% -1.15% ) in the reduction of consumer spending for the basket of goods chosen.

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[1] Pierre Noël Giraud, "Should we condemn speculation? "Economic Alternatives, June 2002

[ 2] Prices are those observed in the markets of Douala and Yaounde in November 2008.

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Public service: definition and different designs

1. Definition and characteristics

Public service is an activity undertaken by a public figure, provided by a public or a private person to perform or satisfy a general interest (GUGLIELMI and Kouba, 2007). Activity managed by a private person is qualified for public service activity if it meets three elements [1] :
- There must be an activity of general interest;
- The private person must have public powers to carry out its mission of general interest;
- Administration must have a say on the body.

The general interest is attached to the concept of public service, and this led him to explore the areas affected by the utility, public services to industrial and commercial, and different conceptions of this notion. The areas concerned

by the utility are those which fall within the sovereign functions of government, non-profit sector and the commercial sector.
- Those who fall under the sovereign functions of government are fully tax-funded and insured by government. There is: justice, police, national defense, public finance, general administration.

- The non-profit sector consists mainly of free services funded primarily by taxes or mandatory contributions. This category includes national education, health services, safety social, infrastructure management ...
- The commercial sector includes services funded primarily by business, but are considered to be under the control of the community. It distinguishes transport (urban, rail, air ..) post, drinking water, energy (distribution and transmission of electricity, gas ...).
This category includes public utilities, also called public services to industrial and commercial (CIPS).

utilities to industrial and commercial have five main features (Percebois, 2003):
- Their consumption is divisible, unlike pure public goods whose consumption is indivisible and these are essential goods for which a minimum service is provided by the legislature;
- They are generating demand externalities (club effect) which means that the satisfaction of a consumer generally tends to increase when the number of users on the network increases;
- They are generators of externalities provides this which implies that the presence of a large number of consumers pays offering new services annexes;
- They are subject to risks of congestion, the network is likely to be saturated at certain times, which poses the problem of access priority;
- The public can not ignore how these services are organized, especially for the network that operates as a "natural monopoly", which raises the issue of information asymmetries between the regulator and the regulated and thus the incentives to effort to force the network operator to lower its costs and to increase investment ability required.
production, transportation and distribution of gas and electricity are examples of privileged public services to industrial and commercial.

2. The different conceptions of the notion of public service

There are two main approaches to the concept of public service: The Legal and economical design. According

legal view, falls within the public service "any activity whose performance must be guaranteed, regulated and controlled by governments, because the completion of this activity is essential to the achievement and development of social interdependence, and is of such nature that it can not be fully realized only through the intervention of the government forces "(Duguit, 1928). Three

management principles associated with the concept of public service and SPIC, according to this view, the continuity, the mutability and Equality (ALOY and Leveque, 1997, Mirabel et al., 2001).
- Continuity implies that there is no break in service provision, with the assurance of a minimum service during strikes;
- The mutability (Or adaptability) refers to the need to adapt the public service content based on the development of technical progress and needs of users.
- Equality is a general principle of nondiscrimination, which requires that users are treated equally. It is absolutely not synonymous with free access. The many public utilities have shown, that their pay does not directly access a section of the population, one whose lack of income does not consume the goods in question.

The economic conception of utility has been developed by MARTINAND-LORENZI (1995) and HENRY COHEN (1998). For

MARTINAND and LORENZI (1995), the concept of utility relates to the concepts of natural monopoly and public goods. These two situations describe what economic theory refers to as market failure, namely situations in which a state of perfect competition does not correspond to a Pareto optimum and does not therefore result in welfare maximization Welfare.

The concept of natural monopoly public service refers to industrial and commercial often implements a network activity. That of collective good means property that is accessible to all and whose consumption by one individual does not reduce the availability for others. This concept covers non-market services like national defense.

COHEN and HENRY (1998), introduce the two aspects of efficiency and fairness to characterize the activities and public service missions. According to them, public service is also an expression of solidarity and concern for the public service missions contribute to the reduction of inequalities related to income or physical disabilities. They have among other things, the three main categories of service functions public as:
- Those who seek to make them physically and financially accessible to users at risk of exclusion (due to severe disabilities, critical situations, inadequate incomes) of essential services they need in appropriate forms;
- Those who, beyond strictly the fight against exclusion contribute to social cohesion and sense of belonging to the national community;
- Those who seek to promote the efficient use and balanced in space and time, territory and common resources.
The concept of public service is linked to its missions, in their economic definition are classified under the heading of public utilities (Mirabel et al., 2001).
[1] These items were taken from the French Conseil d'Etat of June 28, 1963.